Charlotte NC Foreclosure Homes Bank Owned REO

Charlotte Foreclosures- Bank Owned, Short Sales and Pre-Foreclosure

Charlotte Foreclosure Property-Properties Bank Owned and Short Sales

We are foreclosure and short sale experts. Terry sold the largest foreclosure on Lake Wylie in 2008, and he’s back at it again with two sales in June, 2010 at the Palisades this year- both short sales… WE KNOW DISTRESSED PROPERTY

REO, or real estate owned, is the same as saying it’s a bank owned home & it is quite a bit different than the normal home buying process. It’s different for the buyer because you have fewer protections, different also because banks use their own real estate forms to limit their liability, while at the same time reserving the right to sell it to another party until the day of closing and a host of other terms that basically make the “Contract for Sale” a one sided Contract. That said, the home is normally sold at a discount, sometimes a steep discount, and it isn’t unusual to buy a home out of foreclosure and gain instant equity.

The point  is there are trade offs and you or any buyer should be sure to understand the differences, the risks, and then take all necessary precautions. Your right to inspect is limited to 10 days in almost every case- and they typically do NOT do repairs, their addendum’s will specify, still there is no recourse so you MUST know confidently about the house. Similarly, your right to cancel due to lack of financing will be limited.

There is often the thought that a foreclosed home is, by definition, in horrible condition. While often true in the past, more and more we see homes in at least average or above average condition selling as a REO. You just need to look.

What is a Short Sale?

A short sale is defined as when the Sale Proceeds, are LESS than the mortgage payoff(s) and cost of sales.  They occur because of falling property values, bad lending and people losing their jobs after buying a home in the last 3 years or so… for a more lengthy description and conversation, visit  Short Sale or Foreclosure in Charlotte?

Buying a Home In Foreclosure

How Do I Search for REO/Short Sales property?

In the MLS, you have request a custom search,one we set up, and look for terms such as short sale or foreclosure-then we’ll see the whats available in your price range and area.

Search For Charlotte Foreclosures inside Charlotte Homes for Sale

Frequently Asked Questions About REO Property

Pre-Foreclosure vs Short Sales vs. REO

Pre-foreclosure means a notice has been sent by the bank of the default and their intent to foreclose, however, it doesn’t mean it will reach foreclosure, and the owners still have rights and the possibility of making it right. REO stands for Real Estate owned, and is what happens AFTER the lender forecloses, and the home was NOT sold at auction, so the bank/lender bought it up at its note amount. REO is another name for bank owned property. A short sale occurs prior to the actual foreclosure, and the sale is “short” when the sales price minus commissions won’t pay off the existing note, in other words the Seller owes more than the (net) value of the house sales contract. To do this, the bank agrees to accept less than what is owed on the property, and give up their claim against the seller. The discussion on this page refers to REO property- not short sale or pre-foreclosure- and it is our belief that short sales, while potentially offering a win/win, rarely lead to a sale in the Charlotte market because our real estate values have held, and the banks knowing this, usually feel they’ll do better in a foreclosure. The Bank incentives could change if Congress passes the so-called “cram-down” legislation, until then, we’ll work the REO side only.

Foreclosures are Exempt From Disclosure

Whenever anyone sells a house in North Carolina, they must by law give the buyer a signed Disclosure Statement of known defects. This document describes what is in the house, any known issues, and other legal and environmental disclosures. The typical seller has to tell you about any defects he knows about, especially if they are hidden and you might not see them. The seller can be held liable for defects that appear later that were not disclosed when you bought the house. However, there arfe a few exceptions, and REO property is one. Banks are exempt and WON’t give you a Disclosure Statement. For this reason it is absolutely imperative that you do a thorough inspection visually, the with a licensed inspector, and possibly a contractor to do an estimate of any work involved to make necessary repairs. It is best to inspect prior to making an offer, but most banks offer a 1o day inspection perios, and won’t do repairs, but you can take the home off the market while you perform inspections.

Verbal Counter-Offers

After the initial offer is made in writing, counter offers are made verbally until agreement is reached. This is a slower process than a local seller because the bank works bankers hours, may be in a different time zone, or the responsible people are tied up in meetings. It may be 3-7 days before a signed agreement is complete, and then and only then is ther an agreement. During that time, there is the possibility that another offer will come in better than your offer and the bank may accept it. This is especially likely to happen if negotiations stretch over many days or a weekend when more prospective buyers are out looking. The general rule is to try to reach contractual agreement with the least amount of counters. If you are eager to get the property, bring your strongest offer quickly!

Possible Double Pre-Approval/Loan Applications

The bank may require that you get pre-approved with their institution within a few days of accepting your offer. They may or may not want the loan, but they do want to see you are qualified. They can’t force you to take their loan.

Bank MAY Require Their Choice of Closing Attorney’s

Some Banks require this in their Addendum. Understand, if that is the case, you have no representation. We strongly recommend you retain your own attorney for the closing, typically the cost will be no more than $3-500. This is not to be confused with the “closing costs”- it is an additional fee but well worth it. In the typical NC closing, the Buyer picks the attorney, and that attorney jointly represents the lender and buyer, whose interests are simialr. In a REO where the Seller chooses the closing attorney, a Buyer must obtain their own attorney to represent their interest.

Not The Usual Contract-Understand the Addendum

The bank will require their addendum to modify our standard resale contract. Generally, they will accept our standard contract and then add their contract “addendum” when agreeable terms on price and closing have been reached. Their addendum frequently gives them more rights, so please read it carefully, and if you have any questions consult your attorney. Typically, they are in readable English, and won’t accept substantial changes, but you need to read ever line as they have a bad habit of slipping something in somewhere.

Multiple Offer Situations

Often times a foreclosure home is priced so well that several buyers may put offers on the same property. Yes even in this market! In this case all buyers will be notified by the listing agent and they will be asked to communicate their “Highest and Best Offer.” Normally there will be a deadline, say”Highest and Best to the Seller’s Agnet by 6PM ptday. ” At the time that all offers are received, the Listing agent will forward them on to the Seller. The seller will then choose which offer he/she deems to be the best overall offer, and will then finalize negotiations with this buyer individually. The bank is under no obligation to give any party “first position” or an opportunity to beat the other offers regardless of how long your offer was in negotiation prior to other offers coming in. This is why it’s important to bring your strongest offer and reach an acceptance in the shortest about of negotiation time.

More FAQ’s About Bank Owned REO and Short Sale Property

Q: What is a short Sale?

A: Any Sale where the proceeds to the Seller are insufficient to cover the liens and lien-holders. These are unfortunately more and more common place as recent home buyers have been hit by falling home prices. If you hear the expression “upside down ” or “under water”, this refers to the same situation- a sale of the home won’t cover the note(s) plus expenses of sale.

Q: Why would a Bank Short Sell their note? Isn’t the Home buyer on the hook for the whole mortgage?

A: They do it because their losses in a short sale average 15-18%, where a foreclosure typically is losings 25% or more. So, for the Lender, it is a matter of limiting their losses.  Depending on the Borrower/Seller’s other assets, they may continue theior claim (deficiency) or release it, waive the deficiency.

Q: Are Short Sale good deals for the Buyer?

A: Normally yes. If the big questions are right: Is the home is where you want to live? Is it  a style you can live with?  If you find it in the course of your research and  you have time- short sales take a minimum of 60 days, but much more likely 75-90 days to close.  Like any other offer, price research needs to be done to help the Buyer determine an actual value for the home, and at that point you’ll know if it is a deal worth waiting  for, or not.

Q: Are short sales always successful? Do they go through if the buyer waits long enough?

Unfortunately no- they are not always successful. Frequently, the home falls into foreclosure while a short sale offer is on the table. This sounds crazy, but happens too frequently. Sometimes there is never an acceptable agreement among multiple note holders.  Sometimes- though more infrequent- the bank just can’t or won’t make a decision

Q: What is your take on buying the home on the courthouse steps?

A: My opinion is that it is for only the more experienced buyer- there are risks here most buyers do are not aware of.  This is the onbly situation where you might buy a house and there be an unpaid tax bill that you are unknowingly responsible for. Its a better deal to wait until foreclosure.

Q: How much can you save buying a foreclosure?

A: Sometimes as much as 50%, more typically 25-40% these are big numbers, that means a houwe with a market value  of $400,000, might sell from $240,000 on up. Of course, that’s an extreme case, typically it is between 25 and 40% off. It is for this reason that banks are more and more preferring turning over the keys.

What does REO mean?

Real Estate Owned. Bank owned, synonymns

Are these short-sale, sold at auction or VA owned properties?

NO. These are REO properties—foreclosure means the legal process of foreclosure is completed, the bank has cleared, or will clear the liens, and issue a Special Warranty Deed.

Are any of your properties available for rent/lease/rent-to-own?

NO. Banks only want to sell.

How long will it take to get a response from the Seller?

Responses are generally received within 1-5 days on foreclosures, weeks on short sales, and  each bank and each house is different. The Listing agent has no ability to affect Seller’s response time.

Can you push the Seller for a faster response— I’m in a hurry?

No. The bank has no concern about your timetable.

Does the Seller have a survey/plat/inspection of the property?

No, but normally these are availabe online through local online resources- check with us, we can show you where to find it.

Do you know the ???fill in the blank about property condition

NO. Property was acquired by the Seller through foreclosure. Neither the Seller nor the listing Agent has any specific knowledge of the property history or condition.

Can the contract be contingent on a home sale?

NO.

Will the Seller allow early possession?

NO. And in North Carolina closing does not occur until the home has been recorded. For that reason, we try and sign papers early in the day, so it can be recorded the same day, and the Buyer can take possession.

Will the Seller allow estimates or repairs prior to closing?

Yes, at Buyers expense.

Can I give the bank a verbal offer?

NO. No NO! The Seller requires an offer in writing, with a copy of the Earnest Money, Pre-approval or Pre-Qual or Proof of Funds, and frequently more. There is no short cut there- in fact you want an Agent who is thorough and gives the bank EVERYTHING it requests, otherwise you can lose the house while your paperwork is being perfected.

Will the Seller turn on utilities prior to contract so inspections may be conducted?

Yes, in most cases the Seller is willing to accommodate, some charge a fee to re-winterize. Please contact the Listing Agent, or your Buyer Agent, if you wish to arrange inspections prior to contract. This is a vital part of consumer protection and despite the fees, it IS ABSOLUTELY NECESSARY as there is NO recourse against the seller, for any reason. The home is sold “As IS Where IS” and they make it air-tight.

Should I write in the contract personal property/fixtures to convey?

Yes. Just as a double check, since we are on the Banks side of foreclosure- just for the Buyers protection.

Do you work with investors?Are there any special Investor concerns?

Yes we work with investors, and no there are no special considerations, except in our case the numbers tell the biggest story once the house hsa met minimal levels. If you intend to re-sell right away, check your lenders “seasoning” requirements.

Other Questions on Charlotte real estate? Try my Charlotte Homes FAQ’s page.

Terry McDonald

President at The McDonald Group
I'm the owner/team leader of The McDonald Group, team of top producing real estate Brokers who are market experts and trustworthy partners. I blog regularly on Charlotte and the real estate market at CharlotteCommunitiesOnline.com & TerryMcDonaldRealEstate.com respectively.
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